Colgate's Growing Success

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Colgate's Growing Success Colgate’s Growing Success o STRONG R MARKET LEADERSHIP o GREATER PROFITABILITY o THE POWER OF G OBAL TEAMWORK Co~gate-Pa1mo1ive Company 1998 Annual Report ANOTHER YEAR OF STRONG PROGRESS Contents Highlights Highlights 1 Dollars in Millions Except Per Share Amounts 1998 1997 Change New Records in Profits, Worldwide Sales $8,971.6 $9,056.7 – .9% Good Unit Volume Growth Unit Volume +3.5% Colgate’s Growth Strategy 2 Gross Profit Margin 52.2% 50.7% + 1.5 Dear Colgate Shareholder 3 points Glossary of Terms 5 Earnings Before Interest & Taxes $1,423.0 $1,285.8 + 11% Colgate’s Growing Success Percent of Sales 15.9% 14.2% + 1.7 I. Stronger Market Leadership 6 points Building Number One Positions Net Income $ 848.6 $ 740.4 + 15% II. Greater Profitability 9 Percent of Sales 9.5% 8.2% + 1.3 Bringing Colgate’s Products to points Consumers Faster and More Efficiently Basic Earnings Per Share $ 2.81 $ 2.44 + 15% III. The Power of Global Teamwork 13 Dividends Paid Per Share $ 1.10 $ 1.06 + 4% 38,000 Colgate People Sharing Operating Cash Flow $1,178.8 $1,097.8 + 7% Across Borders Return on Capital 20.4% 18.0% + 2.4 Global Business Review 15 points Operating Highlights for Latin America, Return on Equity 39.8% 35.2% + 4.6 North America, Europe, Asia/Africa and points Hill’s Pet Nutrition Number of Registered Common Shareholders 45,800 46,800 – 2% Board of Directors 19 Number of Common Shares Outstanding 292.7 295.4 – 1% Your Management Team 19 Year-end Stock Price $ 92.88 $ 73.50 + 26% Shareholder Information 21 Eleven-Year Financial Summary 21 ■ Net income increased 15 percent to a record $848.6 million, also setting a record as a percentage of sales, 9.5 percent versus 8.2 percent in 1997, reflecting growing pro- ductivity. ■ Gross profit margin reached a record as well, rising 1.5 percentage points to 52.2 percent. ■ Unit volume growth was driven by strong performances in North America, up About Colgate 5 percent, Latin America, up 7 percent, and Hill’s Pet Nutrition, up 4 percent. ■ Sales would have increased 6 percent without the impact of translating foreign Colgate-Palmolive is a $9 billion global company serving people in more than 200 countries and currencies into the stronger dollar and divestments. territories with consumer products that make lives ■ New products contributed a record $3 billion of sales, or 33 percent of the total, healthier and more enjoyable. The Company from introductions in the most recent five years. focuses on strong global brands in its core busi- ■ nesses — Oral Care, Personal Care, Household Care, Total return from stock price appreciation and dividends was 28 percent for 1998. Fabric Care and Pet Nutrition. Colgate is following a tightly defined strategy to increase global market leadership positions for key products, such as toothpaste, toothbrushes, bar and liquid soap, deodorants/antiperspirants, dishwashing deter- gents, household cleaners, fabric softeners and pet nutrition. On the Cover The young girl wearing a big smile and toting Colgate toothpaste in her backpack was photographed in Warsaw, Poland. Colgate’s Growing Success 1 Colgate’s Growing Success Colgate is continuing its record of strong growth and increased profitability through an aggressive strategy which takes the Company well into the next century. Central to this growth doctrine is strengthening market leadership in Colgate’s core categories while increasing the returns from all aspects of the business. Colgate people worldwide are using the latest business tools, working together as an efficient team, to achieve specific growth and shareholder value goals. Colgate’s Growing Success 2 Dear Colgate Shareholder EXCELLENT DOUBLE-DIGIT EARNINGS GROWTH; 1998 WAS A RECORD YEAR We achieved in 1998 another share in many other countries Colgate’s financial perfor- year of strong progress for as well. At the same time, mance is strong. And we Colgate. Net income, earnings Colgate’s strong Personal Care believe that Colgate’s proven per share, gross profit margin positions were improved, target- business strategies and global and operating profit margin ing the fast-growing liquid soap, experience will serve us well established new records. Fun- deodorant and hair care seg- into the next century. This con- “Colgate people can be damental to our success — pre- ments. Broad gains in other fidence is based on experi- justly proud of achieving strong market shares here sent and future — is our core categories encompassed ence. Year after year, we have and abroad while driving commitment to people working cleaners, fabric softeners and added to the number of leading down costs sharply in a together. Training and global dishwashing liquids. brands in our portfolio. More- disciplined fashion. I am sharing of ideas enable Our leadership strategy is over, Colgate people are highly delighted with our strong Colgate to maximize its best supported by a powerful but adept at transferring success- 1998 performance, even resource: the 38,000 Colgate simple financial approach that ful programs and products from during economic uncertainty in many areas of the world. people worldwide. enables Colgate to achieve one country to others. For We are looking forward to Colgate people strength- record profits. In 1998, your Colgate shareholders, this has another good year in 1999.” ened our market leadership Company increased net income translated into consistent, Reuben Mark positions. We are proud that 15 percent to a record $849 favorable total return. Colgate-U.S. decisively gained million, or $2.81 versus $2.44 the Number One spot in the per basic share. Gross profit Powerful Strategy Produces domestic toothpaste market margin improved by 1.5 percen- Leadership Positions in 1998. We strengthened tage points to 52.2 percent, and Colgate’s leadership strategy Colgate’s toothpaste market operating profit margin improved begins with introducing innova- by 1.7 points to 15.9 percent. tive new products, and then Both ratios were records. quickly realizing their worldwide Cash flow from operations potential with the most effec- reached a new record as well: tive advertising, promotions $1.2 billion. This healthy cash and distribution. flow also helped us maintain In addition to capturing debt capitalization in the opti- toothpaste leadership in the mum 50 to 55 percent range. U.S., we strengthened our During 1998, Colgate repur- Number One rankings in chased 7.1 million shares at a such countries as Canada, cost of $542.5 million, as part the U.K. and Mexico, and of our previously announced hold leadership positions in share buyback programs. toothpaste in 175 countries. Like other multinationals, Colgate whitening toothpaste, Colgate has faced negative cur- for example, has captured “I take deep satisfaction from rency translation and reduced almost 50 percent of the Colgate’s having become purchasing power in some world’s whitening segment Number One in the U.S. regions. Still, unit volume grew and has been expanded to toothpaste market, a key 3.5 percent for 1998, driven by 75 countries. Colgate’s global objective for several years. strong performance in North market share for toothpaste From a global perspective, I America, Latin America and is at a record high. am pleased that we achieved our strongest growth in Oral Hill’s Pet Nutrition. Sales were Importantly, our leadership Care, Personal Care and Hill’s $9.0 billion, a decrease of positions extend throughout Pet Nutrition. These are our less than 1 percent. Exclud- all core categories. Colgate most profitable categories.” ing foreign currency transla- also leads the market in liquid Bill Shanahan tion and divestments, sales soaps, men’s stick deodorant, increased 6 percent. liquid cleaners and fabric 3 Colgate’s Growing Success Gross Profit Margin softeners in scores of coun- market share, especially Cost Savings Continue 52.2% 53% tries. New variants of Palmolive where incomes are low. We To support leadership, we rely 50.7% 49.1% shower gel introduced in Europe are working to encourage more on a financial strategy of reduc- 50 helped increase market shares purchases per household ing overhead and increasing 47 in nine countries. Halfway through special-size packaging, gross profit margin. We focus 44 around the globe, in Argentina, innovative distribution and on profitable growth by allocat- new variants of the same education. For instance, our ing 60 percent of capital 0 96 97 98 shower gel quickly achieved programs to increase home expenditures to cost-savings (% to sales) an 11 percent share of this usage in Colombia have helped programs. The money we save Earnings Per Share Growth segment after launch. In the to more than triple household is invested back into new prod- U.S., we restaged and intro- penetration of fabric softener ucts and advertising and is $3.00 $2.81 duced a new line of Softsoap in just five years. As the mar- returned to shareholders in 2.50 $2.44 brand body washes, capitaliz- ket leader, with 80 percent of the form of increased profits. $2.09 2.00 ing on the demand for colorful, the category, Colgate-Colombia Savings will continue to scented shower gels. World- benefits. Similar programs come from a number of areas. 1.50 wide, our liquid soaps saw are working to build consump- For several years, we have 0 continued double-digit volume tion in Asia. been telling you about the ben- 96 97 98 growth in 1998. efits of the high-tech global (Basic Earnings Per Share) Around the world, a record Leaders Have the software called SAP. This inte- Charts: Gross profit mar- gin continues to $3.0 billion of sales, or 33 Advantage grated software reinforces increase as a percent- percent of the total, came from In addition to its financial streamlining of our business at age of sales, a key goal.
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